Johnson & Johnson‘s (NYSE:JNJ) medical device & diagnostics segment missed Wall Street’s 2nd-quarter sales forecast by some $126 million, largely due to falling sales for its diabetes business, but the healthcare giant’s orthopedic results could augur well for that space.
The New Brunswick, N.J.-based company reported diabetes sales of $589 million for the 3 months ended June 30, down 12.5% compared with $673 million during Q2 2012. That could be due to slowing sales of diabetes test strips, as healthcare providers waited for new competitive bidding rules to kick in July 1, according to Leerink Swann analyst Danielle Antalffy.
On the orthopedics front, sales were $2.39 billion during the quarter, up 46.5% on an estimated $750 million contribution from its Synthes business, acquired for $21.3 billion in 2011. Absent that contribution, ortho sales were $1.64 billion, JNJ said; worldwide operational sales growth was only 0.5% excluding the Synthes sales.
"Orthopedics sales missed our estimate by just $7M, despite a lower than-expected Synthes contribution – ~$750M based on our analysis vs. our $915M estimate," Antalffy wrote. "This could further support the notion of: 1) stabilizing ortho markets broadly; and 2) some salesforce/customer turnover at Synthes post-acquisition."
In the U.S., orthopedics sales were $1.27 billion, up 45.9% compared with $873 million during the same period last year.
Cardiovascular sales were $529 million, up 5.0% compared with $504 million during Q2 2012. U.S. cardiovascular sales were $204 million, up 4.6% compared with $195 million in the year-ago quarter.
JNJ raised its earnings outlook for the rest of the year, saying it now expects full-year adjusted earnings per share to be between $5.40 and $5.47, up from prior guidance for adjusted EPS of $5.35-$5.45. Antalffy views that as a sign of caution on the part of Johnson & Johnson’s management.
"If investors want to nitpick, the company is raising guidance by $0.05 at the low end and only $0.02 at the high end – despite a $0.09 beat vs. the Street – which could imply a now worse-than-expected back half of the year," she wrote. "But we’re inclined to think JNJ management is being conservative in today’s guidance raise, particularly given still seemingly weak MD&D trends."
